Jan 30, 2015
Executives
Paulo Faustino da Costa - Market Relations Department Director Luiz Carlos Angelotti - Executive Managing Director and Investor Relations Officer
Analysts
Mario Pierry - Bank of America Tito Labarta - Deutsche Bank Thiago Batista - Banco Itau Saul Martinez - JP Morgan Boris Molina - Santander Victor Galliano - Barclays
Operator
Good morning, ladies and gentlemen. We would like to welcome everyone to Banco Bradesco’s Fourth Quarter 2014 Earnings Results Conference Call.
This call is being broadcasted simultaneously through the Internet in the website www.bradesco.com.br/ir. In that address, you can also find a banner through which the presentation will be available for download.
We inform that all participants will only be able to listen to the conference call during the company’s presentation. After the presentation, there will be a question-and-answer session.
At that time, further instructions will be given. [Operator Instructions].
Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Banco Bradesco’s management and on information currently available to the Company.
Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events, and therefore depend on circumstances that may or may not occur in the future.
Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Banco Bradesco and could cause results to differ materially from those expressed in such forward-looking statements. Now I’ll turn the conference over to Mr.
Paulo Faustino da Costa, Market Relations Department Director.
Paulo Faustino da Costa
Good morning, everyone, and thank you all for participating in our fourth quarter conference call. We are here today to provide you with all the information you may need about our numbers.
And this is in line with our goal of always increasing the transparency of information disclosed to the market. We have here today Mr.
Alexandre da Silva Gluher, Brazil’s Executive Vice President; Mr. Marco Antonio Rossi, Chief Executive Officer of Bradesco Seguros Group and Bradesco Executive Vice President; Mr.
Luiz Carlos Angelotti, Executive Managing Director and Investor Relations Officer; and Mr. Moacir Nachbar Jr., Executive Director.
I will now turn to our existing Director and Investor Relations Officer, Mr. Luiz Carlos Angelotti, who will lead our conference call.
And after his presentation, we will be opening to answer your questions. Mr.
Angelotti, please go ahead.
Luiz Carlos Angelotti
Good morning, everyone. We will now go over Bradesco’s results for the fourth quarter of 2014.
We’re starting on Slide 2 with the highlights of the period. The adjusted net income reached R$15.3 billion in 2014, up 25.9% year-over-year.
And it’s 4.1% in this fourth quarter, up 4.6% quarter-over-quarter. ROE reached 20.1% in 2014, a 200 bps increase year-over-year.
Our ROE in 2013 was running around 18% and then we have a [indiscernible] increase during 2014. And the increase was possibly because our NII interest earnings portion increased by 12% [indiscernible].
Our efficiency ratio reached 39.2%. It’s the best level ever in the [indiscernible] to reach our target [indiscernible] five years ago.
Our fee and commission income increased by 11.6% year-over-year as a result of investments in the increased segmentation of our client base and the improvement in technology and also more products for our clients. The operating expenses, the personnel and the administrative went up by 190 bps below inflation year-over-year.
And our target for 2015 is to maintain the operating expenses going below the inflation. Our total assets exceed at R$1 trillion.
And the expanded loan portfolio reached R$450 billion, up 6.5% year-over-year. The net income from insurances amounted to R$4.4 billion in 2014, up 17.8% year-over-year as well [ph].
And the insurance written premiums increased 13.9%. Moving to Slide 3, we have the book net income versus our adjusted net income.
In the fourth quarter, our book net income is R$3.9 billion. And we had some non-recurring events.
And the remaining events as it relates to the impairment of assets, R$702 million and the - composed by [indiscernible] million related to softwares that during the year [indiscernible] and the R$617 million is related to in terms of the [indiscernible] shares that we have in the insurances portfolio using as a guarantee of the technical reserves. With these adjustments, non-recurring events that we had in the period, our revenues and our profit is - or just the net income in the quarter is R$4.132 billion.
And our final ROE for the year is 20.1%. Moving to the Slide 4, we have the adjusted net income growth.
In the quarter, the growth is 4.6% in the - we have from the net interest earnings portion contributions of $525 million related to the increase of business volumes. And the highlight is the main loan and insurance [ph] margins that will have the contribution.
The fees, we had R$200 million and the negative impact that we had in the period, it relates to the other activity [ph] and personnel cost [ph], the operational cost that is in the amount of R$643 [ph] million above the average that we had in the other quarters. But we had seasonal effects normally in the last quarter of the year, we have a seasonal growth in the operating expense related to the more volume in the transactions.
And then we have some cost reduction related to the economies [ph] [indiscernible]. And we had an increase in the marketing expenses.
Okay, talking about the [indiscernible] we had contribution - both contributions from the net interest earnings portion. And the related to the increase of [indiscernible] the main factors came from the loan margins and the funding margins.
Fees has a very good contribution, more than R$2 billion - R$2.3 billion in the year. They’re both growth that they have because we include the other parts for our clients.
And the operating expenses, reducing the additional [indiscernible] and R$1.2 billion, that is we need to pay the fee, we had a growth [indiscernible] operating expenses and the additional commitment of this - in the company within the contract cost. Moving to the Slide 5, we have the net income breakdown.
This part we could not [indiscernible] reasonably stable out of the volumes of our products [ph]. We expect that for 2015, that [indiscernible] we continue running that more lower level.
But [indiscernible] most contributions [indiscernible] stable because we expected our, that includes ratios will continue to be stable. Then at the net low margins, we’ll continue having a [indiscernible] contribution.
And the [indiscernible] we have a 72% of our products that came from the other [indiscernible]. We have fees on the funding earnings and they choose contribution.
That is low margin almost 30% of our profit. Then these diversification of the [indiscernible] the possibility to one thing, the expectations of stability in our profits for the next new year, at least for 2015.
Moving to Slide 6, we have the efficiency and operating coverage ratios. The lines that we have in the [indiscernible] is the - our operating coverage ratios.
That’s the combination of the fees and the commissions to the personnel and administrative costs. We are having a continuous growth in this ratio.
Then our - as we are improving our efficiency. And we can see that our efficiency ratio is improving this year.
We have yet decreasing the ratio around 300 bps that is the combination of our efforts for increasing the revenues and [indiscernible] to the cost or expenses. And we have such a tool to have reached now the best level ever.
That is what we have in the company, this 35% [indiscernible] as we planned five years ago. And we now - we have this level.
We expect to on the next season [ph] that probably we’ll continue having some more - the indications of improving the efficiency. But probably, it will be in a more gradual way, probably - mostly likely at 1% a year that we expect to continue improving.
And that we will improve our [indiscernible] our efforts for 22 [ph] not paying our ratio [ph] run in a better way. Moving to Slide 7, we have here our NII.
In this quarter, our NII reached - the total NII is R$12.9 billion spreading R$105 billion compared to its other quarter. We have now our mean here.
Normally we disclose our mean. The quarter mean [indiscernible] that is in this quarter, the number that we have is 7.7%.
But now we will start to disclose the mean. We’ll see in the year [indiscernible] basis, that now is 7.2%, I think.
We think that this - the ratio shows there the thing [ph] that [indiscernible] our mean for the company. And that’s now at 7.2% and we expected for 2015 that this ratio will maintain stable after this level, 7.2%, with [indiscernible] we will expect this stabilization in the ratio.
Moving forward to the Slide 8, we have the NII Interest Earning Portion. Let’s see, this quarter, we finished with R$12.7 million, probably another $25 million [ph] growth compared with the year, with a quarter before.
In the quarter, the main highlight we had in the [indiscernible] margin 24% growth. [Indiscernible] of transactions for insurance and [indiscernible] with the combination in the [indiscernible] during this quarter has a 1% additional growth.
And then we have some loans that have [indiscernible]. And we have these additional revenues.
Looking to the year we have 12% growth and the main sector is more related to loans that is around 70% of the total NII. And the funding that will yield [ph] 33%.
And we are working to reduce the cost of funding and give more priority for the [indiscernible] funding. And we have success in 2014.
I we expect that until June 2016. We will maintain this policy and then probably - well, we expect some additional gains in the next year - going to 2016, which is the guidance for 2015 for our NII, that is 6% to 10% growth.
And then we expect to see our NIIs from loans will probably be more a little better than this, what we had in 2014, 5.5%. And we expect to have a better evolution, better growth, because it spreads in some operations that we have possibility to increase.
In the funding portion, because of the lost control that they are working and they’re finishing, improving when you compare to 2014. We expect to have a growth around 10%.
Insurance normally our margins, we have a growth between 10% to 15% in the average. And the securities and others, our other assets and liabilities of the balance sheet, excluding loans, funding and insurance assets and insurance policy.
And we expect to have a growth of around 10%. Moving to Slide 9 is our Interest Margin.
We’re having the thought of the [indiscernible] our expense that is reasonable stable on 15%. We expect that probably in 2016, we will - wanting [indiscernible] our expense last year, the interest ratio.
We expect that we will have some improvements. Now we have 6% [indiscernible] going 2015.
We expect to have some improvements because our expectations for the cost which is the interest ratio that is in this graph is the red portion. We expect some stability during the year in the interest ratio and the cost [indiscernible] our expectations for the credit margin.
Then probably the best [ph] interest that we have now is 10% [ph] of that. Our cost with the interest ratio is consuming from our credit margin.
So we’ll be running more and close of [ph] 38% during the 2016. In the cost with the benefits ratio, we [indiscernible] stability in delinquency ratio during the year [indiscernible] loan portfolio growth [indiscernible] only 6%.
And probably, this is what we expect because we - there’s lot of other portfolio that we had. Moving to Slide 10.
We have our BIS ratio, [indiscernible] ratio. On the left-hand side, we have the - our position in this quarter.
We finished with 12.9%. And the - doing a simulation which are [indiscernible].
We start with 12.9% and then we had the [indiscernible] and the 1.6% decrease of the additional dilution [ph] that we had according to [indiscernible]. During the fourth quarter, we did the [indiscernible] cash for the non-insurance company [ph].
Now, with the adjustments that’s very small, there’s only 0.1% that we need to do. On the [indiscernible] was 1.4%.
And the - looking to the future, our [indiscernible] that we will do the compensation in 2019. Our tier 1 [ph] that we expect to have is 12.4%.
It’s more than the requirement that we have now. And then we [indiscernible] possible to do the [indiscernible] implementation without any [indiscernible] any limitation or [indiscernible] our clients.
On the right-hand side, the top of the [indiscernible] we have here a new [indiscernible] demonstration and kind of have a decision that to maintain our [indiscernible] with a minimum of 11% when we have the final [indiscernible]. And with the traditional margin of 27% [indiscernible] tier 1 and tier 2 bonds [ph].
Considering this ratio, that’s what we expect to maintain in the future, if we do our calculation and [indiscernible] the ROE of Bradesco considering the risk gets [ph] allocated for our operations, we have here the ROE now, Bradesco will be at 24% [indiscernible] that we are running. [Indiscernible] the excess cash or excess capital that we have today, we maintain [indiscernible] implementation of the Basel III.
We have the best situation in this Brazilian environment, Brazilian financial companies for us to do the Basel III implementation. Moving to Slide 11, we have the information about our assets.
We finished the year with R$1 trillion and the first R$2 billion in assets. Our return on assets is stable in 1.6% and the - our equity, we finished the year with R$81.5 billion, 14.9% growth, and the ROE, 0.1%.
In Slide 12, we have here our expanded loan portfolio. We finished the quarter with R$455 billion, 6.5% growth in the last 12 months.
And we have the individual segment that has the best - the higher growth, 8.2%. And the companies [ph] segment, corporate had the best performance, 7.3%.
And the SME is running now of only 3.4% in the last 12 months. And our expectation is probably SMEs will maintain similar growth, probably very similar that we had in 2014.
[Indiscernible] having the higher growth [ph] in the portfolio is beyond six times that we had in 2014, that we will maintain the higher growth [indiscernible] similar resolution. Moving to Slide 13, we have the delinquency ratio.
On the top left side [ph], we have the delinquency over 90 days. In this quarter, we have a decrease in our ratio, a 0.1% decrease, related to the decrease in the delinquency ratio for individuals and the SMEs.
And we [indiscernible] in the delinquency ratio. Our expectation is that these numbers of 3.5%, probably - during 2015, we expect to have [indiscernible] stability in this ratio because when - in the [indiscernible] portfolio, we have some progress that [indiscernible] the higher growth [ph] in the portfolio has less delinquency ratio that is real estate financing in material [ph] loans.
In the corporate portfolio that we have now 28% delinquency ratio, then more and more [indiscernible] are on the 0.4%, 0.5%. Then, of course, we expect during the year that [indiscernible] then our expectation then is that the - this number, 3.5 growth, we will be running at 0.1% more or 0.1% less during the year, but [indiscernible] the stability.
And where we look for the short delinquency ratio, the - another graph that we have in the right--hand side - the right-hand side shows that the next quarter we had a new decrease in the ratio, 0.1%, in the [indiscernible] segment. In the [indiscernible], we had this movement [ph].
Moving to Slide 14, we have the provisions and the coverage ratios. On the top of the slide, we have here - in the first line is our provisions compared with our [indiscernible] portfolio, that now is 6.7%.
In the second line, we have the level of provisions according to Central Bank rules, that it needs to be 6%. Then if the - these points are presented - they’re on the provision [indiscernible] is our excess provisions.
And when we compare with the real laws that we have in the company after the delinquency ratio that means less line or lower line level. That is only 3%.
Then our provisions, excess provisions to cover these laws in one year is only R$12.7 billion then shows that - how we are comfortable with our provisioning - provision level. And the red line in here is our delinquency ratio.
That’s the - shows that the - we have [indiscernible] and then normally, our delinquency ratio is - [indiscernible] delinquency ratio [indiscernible] real laws is under our - the level of our delinquency ratio normally that we have. Looking [ph] for the slides that we have in the right side, we have here in the - in this last quarter, the red column is the level of provisions that we have in the - our balance sheet strength, R$3.1 billion.
It’s the total of provisions that we finished in the quarter. And the - our coverage ratio that we have now for operations, overdue more than 60 days, is a 166%.
And the - for the operations, overdue more than 90 days, is 189%. Then we had in both [ph] focus ratio some additional growth this quarter.
Then we are very comfortable with this level of the coverage ratio and this is one of the highest level in the Brazilian financial companies. And there is possibility that in the next few years that we will some stability in these ratios, probably with some growth or some decrease.
But we do expect any higher augmentation [ph] and then more stability. In Slide 15, we have the fee and commission income.
In the fourth quarter of 2014, we finished with R$5.8 billion. In this quarter, 3.5% growth.
But in a year, we have 11.6% growth. And the main growth and the more important growth in the cards, 12.8 billion cards now, is one-third of the total fees.
And probably, we will maintain this and double this growth in the next years. And this why we expect that probably we’ll have [indiscernible] fees and commissions running in a double-digit way [ph], pushing by a card and [ph] another line, important line, is checking accounts, that in the last 12 months, we had 11.4%.
But the - with the segmentation investment that we are doing and we are trying to build, that we are improving the number of clients, we expect to maintain or double this - growing this line. Loan operations is another line that we could maintain these solutions.
And the consortium that [indiscernible] year-after-year are only 20%. They’re a very important part of for us in the - our revenues on the investment banks [indiscernible] and the rising financial [indiscernible], that’s probably - we will help [indiscernible] ago.
And it’s the guidance that we gave for 2015, that is 8% to 12%. Our expectations after we finished the year are running more and more in a higher level of the guidance between 10% and 12%.
Moving to Slide 16, we have the operating expense. We finished the quarter with $12.8 billion.
In this quarter, we had a growth of 8.9%, higher than [indiscernible] of growth that we had in the other quarters. But we have here the effect of the seasonality and - but the administrative cost, we had marketing investments that is normal.
We have marketing investments in the end of the year. In the - we have some costs that we - they have the growth - they have growth related to the business volume that would increase over the business volume in the last quarter.
We have some additional expenses. And in the personal expenses, we have the effects of the agreement with the union in September.
This is why we have some additional cost. But when we look at the full year, we finished the year with 4.5%.
Administrative costs running - growing only 2.3%. Then this shows the commitment of the company with the control of cost, with the efficiency.
And we expect to maintain costs for the next few running below the inflation. Our guidance that we gave you for 2015 for our operating expenses, 5% to 7%.
And the 7% is the level of inflation that we expected. Our economic department is - the inflation that we expected around 6.8%.
Then we understand that it’s possible to confuse running costs below the inflation and the - because the effects of the investment in technology, our revitalization that we are doing in IT systems during 2015 and 2016, we will continue the implementation of the new systems in the bench [ph]. And the older systems, we will turn off.
And our new system that we use to do the implementation, this year there are [ph] possibility to review the process to have the best quality in the information, more automatization. Then we will continue to have some benefits of the IT revitalization plan.
And the [indiscernible] our efficiency committee will continue working to maintain costs cost running below the inflation working with our departments in the banks, our responsibles for areas [ph], looking for reduced cost and revising our process. Moving to Slide 17, we have the some news about our insurance business.
Then our insurance written premiums, pension plan and the contributions, and the capitalization bond income posted a 38% growth quarter-over-quarter, mainly coming from the life and pension plan segment drive by a higher concentration of pension plan contributions in the period. On the annual basis, we saw an increase of 13.9%.
This is regarding the effects of the fact that we reduced the DPVAT Association. I would also like to highlight the performance of our auto that we will briefly present [ph].
Auto 22% and capitalization bonds 15%. The net income for the quarter increased 60.8% basically as a result of the decrease in the revenues and the 108 basis point decrease in the claims ratio and the strong financial results for the business.
And the year-over-year, the net income increased 17.8% and this is mainly explained by an increase in the revenues, the maintenance of the claims and the expense ratios, improvement in the administrative efficiency ratio in the insurance company and the stronger financial results. Moving to Slide 18, we show some of the main figures of our insurance activities.
The financial assets amounted to R$166 billion while technical reserves stood at R$153 billion, R$134 billion of which is from life and pension plan. Now in Slide 19, here we have the comparison with the 2014 guidance and the actual performance that we finished the year.
Now the majority of the guidance we have the - we have that reached an impressive [ph] target. We only - we need to remember only the loan portfolio during the year.
We need to revise the loan portfolio growth because the economic environment, we decreased our expectations of loan portfolio growth. But we need to remember that our NII, interest earning portion, we increased the guidance.
And in the fee and commission, we did a similar movement. And in this Slide 20, we have our guidance for 2015.
As I told you, for the loan portfolio, 5% to 9%. The extent of the guidance is - 7% is a little better growth we expect to - when we compare with 2014.
And our expectations for the prolonged productivity growth is 0.45% that we have here from our economic department. The NII, interest earning portion, 6% to 10%, we expect to have.
And the main contribution came from mortgage loan portfolio because the expectation to have some additional spread and little better growth. Fees, we have Page 12, but we expect to maintain in a higher level the guidance in the double-digit portion, only between 10% to 12%.
Operating expenses, 5% to 7%, we maintain our targets to have operating expense running below the inflation. The limit is at 7%.
And insurance premiums that we have - that would the - guidance will grow 12% to 15%. We are going to focus into this [ph] guidance because the new commercial structure that we have for our insurance company that we restructured during 2014 and considering the high synergies that we have between the bank and the insurance company.
Finally, we consider our performance in 2014 that it was very good, especially considering the challenges [indiscernible] especially the goals that we met. Among which I highlight our ROE are only 20% and the efficiency ratio that we - we reached 39% which provided us a 25% increase in the net income and the [indiscernible] payout.
Also, our coverage ratios remained strong and our delinquency ratios remained stable. This is important for the solid balance sheet that Bradesco maintains.
And this aspects reflect the strategic planning initiatives, aimed at generating consistent and sustainable results, preparing us to face the easing [ph] challenges in 2015. We will continue investing in our business in addition to our recurrent investments in infrastructure, IT and telecommunications, and that average is along the R$5 billion.
In 2015, we expect new and additional investments in around the [ph] R$1 billion. That will be directional to have a modernization of our branches and improve the number of our branch.
We are working to offer better quality [ph] changes for our clients. Thank you for your attention and we would like right now to invite you to our Q&A section.
Operator
Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Mario Pierry, Bank of America.
Mario Pierry
Good morning, everybody, and thank you for a very detailed presentation. I have two questions.
First one is related to asset quality. You seem very comfortable of the outlook for NPLs, for provisions.
Meanwhile, we see that the macro trends in Brazil are deteriorating especially with regards to inflation, unemployment, GDP growth. So it seems like there is a disconnect between what you’re seeing and what we are reading in the papers and seeing day to day.
So I wanted to get a better feel for why are you so confident that you can maintain NPLs under control. Is it because you have been very cautious in growing over the last few years or is it because you have a more upbeat outlook for the economy?
My second question is related to net interest margin. On your outlook, you’re talking about stable net interest margins.
However, we are seeing that the competitive environment seems to be better for you today especially as public sector banks are slowing down. Also, interest rates are much higher than they were.
When I look at your net interest margin in 2014, they increased 60 basis points throughout the year from the fourth quarter of ‘13 to the fourth quarter of ‘14. So why don’t you expect net interest margins to be higher in 2015?
Thank you.
Luiz Carlos Angelotti
Thank you, Mario, for the questions. About the asset quality, we know actually in 2016 the goal of the economy will be a lower level - the money [ph] of our adjustments that we could have some another adjustment in the expectation of [indiscernible].
But I think first, we have more sensitivity in loan growth. If we have some decrease in the GDP expectation but I think we will be - firstly, our loan growth will be more - could be reduced.
We could grow in a lower level of our guidance, that [ph] goes up 5%. But when we talk about the quality of the portfolio, if you reanalyze the main segments that we have, the individuals - example, in our portfolio, individuals - firstly, this will do investments [indiscernible] for - in the last years to develop the part of our models, our systems to do the launch [ph] and the approvals of requests.
And our mix [ph], our models, normally, they check more than 50 information about the client in the operation before to do the approval. Then this is one thing that will help us to maintain the quality of our portfolio.
And the individuals portfolio has the composites [ph] that we have a lower delinquency ratio that we are growing more than the other products. That is mortgage operations and the payroll loans.
And our expectations for unemployment rates for 2015, according to our economic department, is less than 1%, probably we will have an increase in unemployment rate. But it will be 0.7%, 0.8%, I think is the number that we have.
At this level of increase in the unemployment rate and considering the mix of the portfolio and the expectations, the goals that we have for 2015, then probably the individuals delinquency ratio is start - will continue decreasing in a gradual way but if profit will continue decreasing. About SMEs, we expect that SMEs will grow less than the other two segments.
Probably it will grow - the total portfolio of our expectations in the center, 7%. But the SMEs probably will grow next to 3%, same we have in 2014.
We have in this segment a little more volatility. But we don’t expect that we will have an increase in the delinquency ratio considering that the level that we have now in our delinquency ratio - the level that we have is between 4 and 4.5.
Probably during our year [ph], we will be running between these levels. And when we look for corporate portfolio, that is 40% of the total portfolio.
Normally, the delinquency ratio is in a lower level. We have now only 0.8%.
Then we expect probably that this 0.8% will decrease during the year for the normal level that does not go up 0.5%, 3% [ph]. Then with this combination, we expect that we will maintain stability during the year in the delinquency ratio considering the quality of the portfolio that we have now, the environment that we have now, we don’t see any risk to have an increase in the delinquency ratio or a modification in the quality of our portfolio.
Mario Pierry
Okay. Let me - so before you move into the answer for net interest income and net interest margins, let me ask you then a bit more specific about your exposure to the oil and gas sector, like we read in the papers the significant problems at Petrobras, the downgrade of Petrobras today and the impact also it could have on the rest of this sector, how comfortable are you with your position to the oil and gas or how big is your position there?
Luiz Carlos Angelotti
Yes. I can’t say new comment about any clients or specific situation but the - we have that policy in the bank to don’t have the concentration in the portfolio.
Normally, then we have a - do this - after the pulverization segment in companies, the operations we have, the majority are guarantees according to the regional or the structure that they have in the operation. And we analyze how timely [ph] our portfolio according to the Central Bank policies, the ticket [ph], so the big risk that we have, the individual amounts [ph] and their timing [ph].
We check the ratings of the company and we have internally our governance. If you really understand that the way to modify any rate of the company, we do according to the rules.
And our adjustment that we need to do, we ditch [ph] and we are comfortable looking for the portfolio that we have now and the information that we have in the market and the information that we have according to the finance movement that we have in our cash flow of the operation. We are comfortable with the parts of the portfolio.
About the NIIs, I think our number, our guidance is a little conservative. Probably, we could have some opportunities during the year for increase the spread because the competition, the [indiscernible] now are working more in a normal way and perhaps more normal spread.
We see opportunity during the year to continue maintain the spread in a more normal way, so now the efficiency [ph] will be reached that we have in a normal competition. But I think we [indiscernible] during the year.
We understand that we have - how to improve the guidance, how to be able to do that. I think we were a little conservative in this guidance but we could be working on more higher levels regardless.
I think it’s good to be reasonable.
Mario Pierry
Perfect. Thank you very much.
Luiz Carlos Angelotti
Okay.
Operator
Our next question comes from Tito Labarta, Deutsche Bank.
Tito Labarta
Hi, good morning. Thanks for the call.
I have a couple of questions. One just to follow-up a little bit more on asset quality.
This is a big topic now. But just given all the macro concerns that Mario mentioned, but at what point do you think things could begin to shift particularly hearing more potential risk of energy rationing in Brazil?
At what point do you think you could see some deterioration in asset quality and in terms of your provision levels? I think you also mentioned that they can even grow less than loans.
At what point again do you start to get a little bit more uncomfortable just given kind of the macro, so I just want to understand that a little bit more. And then second question, just in terms of your fee income guidance, I know you continue to be seeing a big growth there to credit [ph] or to credit cards.
So also credit cards do quite a bit in the quarter. I just want to understand if loans don’t grow that much, kind of what makes you comfortable that you can continue to grow fee at sort of a double-digit pay [ph]?
So if you can give some more color on that as well. Thank you.
Luiz Carlos Angelotti
Okay. About the assets part, I know we talked about our expectations of stability, we consider the information that you have now that these expectations would be the potential freezing of pricing in some segments in the energy or the nature of [ph] - that we have [indiscernible] in some situations there.
But you need to consider that the - if you look [indiscernible] we are growing not more according [indiscernible] we’re working enough [indiscernible] actually to maintain our portfolio, it is largely stable. We usually expect to grow this year.
I’ll send our guidance that we gave 5% to 9% is what [indiscernible] to grow during this year [indiscernible] this year. Then I think considering the environment, then this, the risk that we have [ph] we could have some additional effect.
But I think in our expectation is probably with the stability would be - will happen during the year because we could have variations of 0.1% more or 0.1% less during the year. But when you’re looking for the long-term, our expectation in our portfolio is that we will have a decreasing in the administration [ph] because the - so the thought that we are growing more and a strong [indiscernible] to have that lowered benefits ratio, in the legal’s portfolio [ph] SMEs is growing less and they hedge off the other segments.
And the corporate portfolio, okay, we have some addition of [indiscernible]. But the average year, we have the additional [indiscernible] last year, we started the year with the GDP expectation that was 2.1%.
We finished the year, we see near or closer to zero. If you look [indiscernible] stable, 3.5% within the year, 3.5% in the end [ph] of the year.
Then [indiscernible] we have a similar situation this. We had found a new [indiscernible] during the year.
But the [indiscernible] portfolio are positioning [indiscernible]. We will maintain this reasonable stability in the delinquency ratio.
Tito Labarta
So just to clarify I guess, so in terms of your sensitivity data, the GDP growth and the macro, you’re still pretty comfortable they’re given sort of the title [ph] lending standards you’ve had over the last year? So that even if there is a recession in Brazil, you still feel pretty comfortable [indiscernible] relatively stable asset quality?
Luiz Carlos Angelotti
Our expectation [indiscernible] 2016 because it’s a year that we will have adjustments, we can have [indiscernible] this small GDP growth, probably 0.5% that you have now or could be less. But our expectation is that in 2016, we’re going to [indiscernible] this year is one year of the [indiscernible].
But we understand that these adjustments will build before the [indiscernible] considering these scenarios that we have here, our expectations, we have [indiscernible] during the year including that we have the negative growth [indiscernible] affected the quality of our portfolio. And in 2016, because we [indiscernible] probably the stability continues.
Tito Labarta
Okay.
Luiz Carlos Angelotti
About the fees that you - especially about third parties that we maintain our huge growth, the guidance that we gave you is [indiscernible] one-third of the total fees, we expect that for this year, 2015 and towards 2016, that we will maintain [indiscernible] but the year-after-year, this [indiscernible] last year, we think, in 2013, I think [indiscernible] 50% goal in [indiscernible]. So this year, it’s 12% [indiscernible].
Probably, 2015, this product will be closer to 11% or a little less than 12%. And the next year, 2012, probably we’ll maintain a [indiscernible] cards considering the environment and the - probably, we’ll maintain this kind of situation to be running at double digits [ph].
And we consider the other fees in the commissions that we had and the dancing [ph] that we are doing in the segmentation and that we are now enhancing our [indiscernible] days of clients is going to be placed in new segments. And we expect you to improve the numbers of products per client to offer more [indiscernible] that’s why we expected the fees to continue growing and just double this growth talking in more lower level in the clients that we have now probably between 10 to 12 is our expectation to finish the year.
But it’s important to [indiscernible] to compare that [indiscernible] and so we have the cost running. [Indiscernible] deficiency in the company.
Tito Labarta
All right. Thank you very much.
Luiz Carlos Angelotti
Operator
Our next question comes from Marcelo Telles, Credit Suisse.
Unidentified Analyst
Hi. Actually, this is Daniel Magallanes [ph].
And I would like to ask you two questions. Firstly, what would be the practical impact in your business from the energy rationing?
For instance, would it be in volume growth in the delinquency? And for the second question, I would like to try to get a little bit more color on our exposure to Petrobas supply chain.
I mean your exposure occurs mainly through bonds or through credit operations? Thank you.
Luiz Carlos Angelotti
Thank you. About the potential effects of the energy price, the rationing, we [indiscernible] we were talking [indiscernible] expect 2.5%, could it be near there or it could be negative.
But yes, the energy thing, about the asset quality, I think don’t [ph] expect you to have [indiscernible] that’s why we talk about this ability in the asset quality, the delinquency ratio. I think some effects could have been in our loan portfolio growth as we are basically growing less than we expect.
Probably the loan portfolio growth will be running at more lower levels than guidance. And talking about the Petrobras, we just talked about the times of our specific situation, but as I told our - of course we don’t have the - in our credit [ph] policy one of these policies [ph] is that to do - not to have a concentration in segments or in clients.
Then we have internal limits for segments in clients. And these limits, we require this normally in our governments, in the committees.
And normally, we achieve in this [indiscernible] is try to prevent the future use. Then I think that is the [indiscernible] have the combination that we have in our portfolio, the guidance that we have in operations, the structures.
We don’t expect any future potential effect [ph]. Then this is why we say that we are [indiscernible] ratio is the stability and then we don’t have all the - other information about this situation.
Unidentified Analyst
Okay, thank you very much.
Luiz Carlos Angelotti
Thank you.
Operator
Our next question comes from Thiago Batista, Banco Itau.
Thiago Batista
Hi, guys. Thanks for the opportunity.
Luiz Carlos Angelotti
Hi, Thiago.
Thiago Batista
I have just two questions. The first one regarding insurance premium growth.
The guidance of ‘12 to ‘15 indicated that the growth of insurance will be even higher than the level we saw last year. So my question is, what is the main segments that will lead this expansion between - during this year?
My second question is about the service fees income. You’ve commented that the credit card and also the checking account will lead the expansion in the fees during this year.
But we noted that the number of checking account holders have declined during last year, so - sorry, actually it went up only 0.2%. So my question is, do you see a higher increase in the number of checking accounts during this year or the segmentation will justify the potential increase in the service accounting fees?
Luiz Carlos Angelotti
Okay, Thiago, thank you. About the insurance fee, guidance fees for premiums, they are in a more higher level if you compare the - or the year.
The one thing - fees because the new commercial structure that we - during 2014 we decreased structure. Then now in [indiscernible] we have a better position in structure to have better growth [ph].
Then considering this situation and the synergy that we have with the bank, the main growth that we expect is in some segments. They may help to [indiscernible] how the insurance - then the main growth that we expect.
But we - normally, the majority of the things came from pension plans. Then we expect to have a little better growing this for the two [ph].
With this combination, I think we will be forced to reach in the bag [indiscernible] the guidance that we have now. About checking account holders, during 2014, we - one thing [ph], the number of checking accounts was more stable.
But because we are working for [indiscernible] now, the segmentation in our biggest of [ph] clients, then we’re working during the year for two. It’s a lot better this new segment that we are creating, that is the naming is [indiscernible].
These two segments that we will be running will be for clients below - actually, we have now the client [ph] segments. We will help this - or it will permit us to improve the number of products per client.
And we expect now during 2016 to recover the growth in our client - checking account holders - the number of checking account holders. Then we use 2014 to develop more of these new segments and now during 2015 we expect to have some benefits now that - with this new segment.
The fees normally - because the [indiscernible] services. We will grow and the clients need to accept to have a migration for these new segments.
But when they accept it, okay, they will start to pay fees a little more higher and additional prices. But they will receive some better benefits and some advantages; therefore, in the end, with this combination, we understand that the fees for our checking account holders, we will have some - we will maintain the double-digit on [ph] 2015.
And we, Bradesco, we are more developing in the segmentation in the top three of our [indiscernible] in the core purchasing increased [ph] segments. Looking for the individuals, we have the private and the primary [ph] clients.
But we are a lot safer to develop more the segmentation [indiscernible] price-based. That’s a big portion of our clients and where we see a lot of opportunity to improve the profitability of our clients.
Thiago Batista
Okay, thank you very much.
Operator
Our next question comes from Saul Martinez, JP Morgan.
Saul Martinez
How are you guys? I hate to be the dead forest [ph] because we’ve addressed asset quality in a lot of details but I think the market’s reaction to what seemingly were good results indicates that there’s a heavy amount of skepticism about your asset quality guidance and especially your guidance for loan loss provisions growing at less than or half the rate of loan growth.
So a couple of additional questions that you partly addressed. First, in a stress scenario where GDP growth doesn’t contract 1% or even 0.5%, but you see 2%, 3% type of contraction or even more over time, how does that impact your view of the business and asset quality in provisioning?
And I worry because obviously on the consumer side you may be okay but with corporates and companies, you have very big tickets and as you start to downgrade companies into higher risk classification, that can have a very, very sizable impact very quickly on your provision. So if you can talk to that, one.
Two, you have in your portfolio based on public disclosures R$36 billion of real estate construction and R$24 billion of construction exposure which is about 7% of your loan book. Can you talk a little bit about why - because it seems that’s bigger than your peers’ - most of your peers’, can you talk a little bit about why you feel comfortable there, especially in light of the issues that some construction companies are facing with the Petrobras corruption scandal?
Luiz Carlos Angelotti
Okay. So about the GDP, we don’t have this expectation to have 3% decrease and negative growth in the GDP.
And we don’t have this expectation [indiscernible] probably you can have not the [ph] 0.5% growth. You have some negative effect but this 2%, 1% [ph], that is not affecting our expectations for the quality of our assets during the year.
The results that this - the scenario that we have, if we have the stress scenario, it’s one scenario where we - probably our growth in the loan portfolio will be on a lower level, 0.5%, could be a little less. But when you look for the 2016, what we expect is that the country will recover the growth.
And the issue of contraction, we can have some reduction in the construction or some effects. But I think [indiscernible] structure has a huge increase in the delinquency ratio in the sector or SMEs or other sectors.
About the exposure that we have, our segments that we have - when we talk about segments, we analyzing our companies that you have there in the list for the companies that you have there and the - we have the - a lot of confidence that [indiscernible] it’s only company [ph] that are working with the Petrobras and they are in the operation with that. We are comfortable with the [indiscernible] we have in - the operation that we have in our segments and the future that we have in the position with our - some of our business that work only with the real estate or mortgage operation.
And we have different sectors or in this concentration that we have for clients, some of the companies that they have here, they are huge in the groups, have many other companies in different other segments. Then they are not the only builders company.
They have these companies in the group that they are builders. Probably this is why we class high and we are seen as builder but they have other investments, other business that relate to other segments.
Then we are comfortable with the position that we have in - per segments or per clients. And this is according our criteria of utilization [ph].
Saul Martinez
Okay. Now, I think - I understand that’s not the base, the economics of - a more severe recession is not the base case view and you’re not factoring that in.
But there are folks who are increasingly worried that given all the negative developments that Brazil can have a much more severe recession than 0.5%, it cascades further. In that scenario, is it fair to say your credit quality will suffer even if it’s very difficult at this point to pinpoint how much?
Luiz Carlos Angelotti
We know that it will be - not be an easier year. It will be a very difficult year because the scenario that we have, the adjustment [ph].
But as I told you, this year it should work [ph]. Normally in our previous [indiscernible], okay, if we work there [indiscernible] two or three years, okay, front view [ph] has now some problems because one part of our growth probably will happen in a more high risk client I think.
But considering the position that we - that this maintained in the last year in the - according to our policy, this is - we could - this allow [ph] that we could maintain the portfolio in a quality that is for us is an offer to support this department that we have now, we expect for 2015. And as I told you, it’s only for 2015 because for 2016, we expect that the economy will start to recover the growth.
And this situation not to - during 2015 not to be an offer to multiply our expectations about the quality of our portfolio, the stability that you expect that - the stability that we are talking with some increase - 21% of part [ph] to 1% decrease. But this is something that will not change our expectations during the year.
Saul Martinez
Okay, thanks a lot.
Luiz Carlos Angelotti
Thank you.
Operator
Our next question comes from Boris Molina, Santander.
Boris Molina
Yes, thank you. Just two questions.
First one is do you expect that the senior [ph] regulators are going to issue a new regulation rate of the basic [ph] fee for domestic significant or large institutions implying an increase in your capital requirement? If so, do you expect this to be 100, 150, 200 basis points?
What are your current thoughts on this? And second, could you please elaborate a little bit on the mark-to-market losses on available-for-sale securities on the bank book?
Apparently, there was a negative adjustment, close to R$500 million in the combination of equities and foreign bonds. If you have any color on this, I would appreciate.
Luiz Carlos Angelotti
Hey, Boris. About the basic fee [ph], some potential new requirements, probably we will have our Central Bank chief tell the [ph] - about some potential new requirements, then probably we will have more expose [ph] after the end of the implementation of the first steps, probably more close off 2018, 2019 I think we will have that information.
But we don’t know how much will be the level. Probably it’s around 1%.
But we don’t have the potential percentage that we expect to absorb. But I think at the maximum it will be similar of the international structure.
We don’t have now this information. And about the market adjustment, is that normal adjustment for the market price of the bond, then it’s for the available-for-sale portfolio, these adjustments that we do is in the average.
According to the portfolio that we have now, we deliver the adjustment looking for the market price. Then we don’t have any security fee [ph] situation that we can highlight.
Boris Molina
Okay, thank you.
Luiz Carlos Angelotti
Thank you.
Operator
Our next question comes from Victor Galliano, Barclays.
Victor Galliano
Hello, there. Just a quick follow-up here on the credit quality issue.
If you look at your consumer credit quality exposure and in particular if you look at that class C which obviously was the dominant driver in terms of consumer loan growth in the last boom, they’re probably sitting on quite a lot of leverage right now, a lot more than the average that the Central Bank data shows. Can you give us some sort of idea of how exposed you are to that class C and what you do to mitigate the risk of worsening NPLs and people going over leveraged in that space?
Thank you.
Luiz Carlos Angelotti
Okay, Victor. I don’t have the information about this to disclose how is our exposure for this class C.
But I think if you look in our portfolio in the business, it’s very pulverized in the [indiscernible] products. I think we don’t expect any modification - our expectation for this new portfolio is that [indiscernible] because the payroll laws [ph] and the mortgages growing at the ratio around 20 - 16%.
In the other products, they are going closer at 7%, 8% and the problem is all the products have more higher risk. Then our [indiscernible] the other products, the delinquency ratio, we don’t see any risks that will - to have modification in our portfolio because then it’s actually in its potential class.
Victor Galliano
Okay, not even any kind of credit cards exposure through the consumer finance then?
Luis Carlos Angelotti
What you - full actions that government - they are doing is trying to control the inflation. Every time that they improve the [indiscernible] ratio, they are reducing the capacity of the people’s finance - their - to buy products.
Then what we have is only the consumption that grow but our portfolio decrease. But we select the kinds of [ph] policy according to the capacity to buy products, to financial capacity in the - according other internal policies.
Then I think we don’t expect any differences affecting our client base considering these [indiscernible] clients.
Victor Galliano
Okay, understood. Thank you.
Luis Carlos Angelotti
Thank you.
Operator
Excuse me, ladies and gentlemen, since there are no further questions, I would like to invite Mr. Paulo Faustino da Costa to proceed.
Paulo Faustino da Costa
Thank you all for participating in this conference call. I would like to take this opportunity to remind you that our Market Relations department and our IR team are at your disposal.
Thank you very much all of you.
Operator
That does conclude the Banco Bradesco’s audio conference for today. Thank you very much for your participation.
Have a good day.